Ampio Pharmaceuticals(AMPE) - 2023 Q3 - Quarterly Report

FORM 10-Q Filing Information Ampio Pharmaceuticals, Inc. is a Delaware-incorporated company whose common stock (AMPE) is registered on the NYSE American Registrant Information Ampio Pharmaceuticals, Inc. is a Delaware-incorporated company with principal executive offices in Englewood, Colorado - Ampio Pharmaceuticals, Inc. is incorporated in Delaware and its common stock trades on the NYSE American under the symbol AMPE[2] Filing Status and Shares Outstanding The registrant is a Non-Accelerated Filer and Smaller Reporting Company, with 832,021 common shares outstanding as of November 10, 2023 - The company is a Non-Accelerated Filer and a Smaller Reporting Company[3] - As of November 10, 2023, there were 832,021 outstanding shares of common stock[3] CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This section highlights forward-looking statements regarding future events, financial position, clinical developments, and strategic alternatives, subject to risks and uncertainties Nature and Scope of Forward-Looking Statements Forward-looking statements cover anticipated clinical developments, financial position, strategic alternatives, capital needs, legal proceedings, and potential partnerships - Forward-looking statements cover anticipated future clinical developments (OA-201), future financial position, management plans, strategic alternatives, capital needs, legal proceedings, and ability to identify strategic partners[7] - The company undertakes no obligation to update or revise these statements, which are subject to risks and uncertainties that could cause actual results to differ materially[8] PART I – FINANCIAL INFORMATION This section presents the company's unaudited financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (unaudited) This section presents unaudited condensed financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, with detailed notes Condensed Balance Sheets The condensed balance sheets show a decrease in cash and total stockholders' equity from December 31, 2022, to September 30, 2023, reflecting a 20-to-1 reverse stock split | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Cash and cash equivalents | $6,398,000 | $12,653,000 | | Total current assets | $7,646,000 | $13,329,000 | | Total assets | $7,646,000 | $13,588,000 | | Accounts payable and accrued expenses | $1,909,000 | $852,000 | | Total current liabilities | $2,271,000 | $1,192,000 | | Total liabilities | $2,271,000 | $1,799,000 | | Total stockholders' equity | $5,375,000 | $11,789,000 | - Balances for September 30, 2023, and December 31, 2022, have been adjusted to reflect a 20-to-1 reverse stock split effected on September 12, 2023[14] Condensed Statements of Operations The condensed statements of operations show a significant reduction in net loss for both the three and nine months ended September 30, 2023, primarily due to decreased operating expenses | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development | $329,000 | $2,747,000 | $1,197,000 | $8,177,000 | | General and administrative | $1,071,000 | $2,975,000 | $6,106,000 | $9,504,000 | | Total operating expenses | $1,400,000 | $7,658,000 | $7,359,000 | $19,617,000 | | Total other income | $171,000 | $1,247,000 | $781,000 | $5,500,000 | | Net loss | $(1,229,000) | $(6,411,000) | $(6,578,000) | $(14,117,000) | | Net loss per common share (Basic) | $(1.53) | $(8.51) | $(8.18) | $(18.73) | | Net loss per common share (Diluted) | $(1.53) | $(10.06) | $(8.18) | $(25.88) | - Net loss per common share and weighted average common shares outstanding for all periods have been retroactively adjusted to reflect the 20-to-1 reverse stock split effected on September 12, 2023[17] Condensed Statements of Stockholders' Equity The condensed statements of stockholders' equity reflect changes including the reclassification of warrant derivative liability and the issuance and redemption of Series D Preferred Stock | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------- | :------------------- | :------------------ | | Additional paid-in capital | $245,848,000 | $245,728,000 | | Accumulated deficit | $(240,473,000) | $(233,939,000) | | Total stockholders' equity | $5,375,000 | $11,789,000 | - The reclassification of warrant derivative liability upon adoption of ASU 2020-06 increased accumulated deficit by $44,000 as of January 1, 2023[19] - Series D Preferred Stock was issued on May 24, 2023, and subsequently redeemed on July 27, 2023, after the reverse stock split approval[19] Condensed Statements of Cash Flows The condensed statements of cash flows indicate a significant reduction in net cash used in operating activities for the nine months ended September 30, 2023 | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(6,578,000) | $(14,117,000) | | Net cash used in operating activities | $(6,255,000) | $(16,834,000) | | Net cash used in investing activities | $0 | $0 | | Net cash used in financing activities | $0 | $(111,000) | | Net change in cash and cash equivalents | $(6,255,000) | $(16,945,000) | | Cash and cash equivalents at end of period | $6,398,000 | $16,947,000 | Notes to Condensed Financial Statements These notes provide detailed explanations of accounting policies, financial position, and operational changes, including the reverse stock split and going concern uncertainty Note 1 – The Company and Summary of Significant Accounting Policies Ampio Pharmaceuticals, Inc. is a pre-revenue biopharmaceutical company focused on developing OA-201 for osteoarthritis, facing substantial doubt about its going concern ability - Ampio is a pre-revenue biopharmaceutical company focused on developing OA-201 for osteoarthritis[25] - The company effected a 20-to-1 reverse stock split on September 12, 2023, retroactively applied to financial statements[27] - As of September 30, 2023, the company had an accumulated deficit of $240.5 million and expects continued operating losses[33] - The company believes it has sufficient liquidity to fund business operations into the first quarter of 2024, but existing factors raise substantial doubt about its ability to continue as a going concern[34][36] Note 2 – Current Assets, Excluding Cash and Cash Equivalents Current assets, excluding cash, include an insurance recovery receivable of $530,000 and prepaid expenses primarily for unamortized commercial insurance premiums - An insurance recovery receivable of $530,000 was recorded as of September 30, 2023, for defense costs related to lawsuits and an SEC investigation[40] Prepaid Expenses and Other | Prepaid Expenses and Other | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Unamortized commercial insurance premiums | $517,000 | $610,000 | | Deferred issuance costs | $136,000 | — | | Deposits | $34,000 | $34,000 | | Other | $31,000 | $32,000 | | Total prepaid expenses and other | $718,000 | $676,000 | Note 3 – Fixed Assets Net fixed assets decreased to zero as of September 30, 2023, due to the sublease of its facility and the sale of all existing fixed assets to the subtenant Fixed Assets, Net | Fixed Assets, Net | September 30, 2023 | December 31, 2022 | | :-------------------- | :------------------- | :------------------ | | Fixed assets, gross | — | $9,429,000 | | Accumulated depreciation | — | $(9,245,000) | | Fixed assets, net | $0 | $184,000 | - Fixed assets were reduced to zero as of September 30, 2023, due to the sublease of the facility and the sale of all existing fixed assets to the subtenant[43] Depreciation and Amortization Expense | Depreciation and Amortization Expense | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Expense | $0 | $347,000 | $122,000 | $865,000 | Note 4 – Accounts Payable and Accrued Expenses Total accounts payable and accrued expenses increased to $1,909,000 as of September 30, 2023, driven by higher professional fees and a new commercial insurance premium financing agreement Accounts Payable and Accrued Expenses | Accounts Payable and Accrued Expenses | September 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------------- | :------------------ | | Accounts payable | $459,000 | $97,000 | | Professional fees | $737,000 | $157,000 | | Commercial insurance premium financing | $354,000 | $189,000 | | Preclinical and clinical trials | $185,000 | $89,000 | | Total | $1,909,000 | $852,000 | - In June 2023, the company entered into a nine-month commercial insurance premium financing agreement for $703,000 at an 8.00% annual interest rate[48] Note 5 – Commitments and Contingencies The company has employment agreements, terminated related party research agreements, and a sublease agreement that transferred lease obligations and resulted in a non-cash gain - The CEO's employment agreement was amended on October 1, 2023, to an indefinite term, while the CFO's term ends in October 2024[49] - All related party research agreements were terminated and no longer in effect as of September 30, 2023[51] - A sublease agreement for the company's facility, effective March 1, 2023, transferred rent, utilities, and insurance responsibilities to the subtenant[54] - The sublease resulted in the derecognition of a $294,000 asset retirement obligation and a $288,000 non-cash gain[54] Note 6 – Warrants Following the adoption of ASU 2020-06, the company reclassified its liability-classified warrants to accumulated deficit, with 52,751 equity-classified warrants outstanding - The company adopted ASU 2020-06 effective January 1, 2023, reclassifying 'investor' liability-classified warrants to accumulated deficit[58] - There was no warrant derivative liability as of September 30, 2023[61] Warrants | Warrants | Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | | :----------------------------- | :----------------- | :------------------------------ | :------------------------------------------ | | Outstanding as of Dec 31, 2022 | 53,263 | $318.80 | 3.80 | | Outstanding as of Sep 30, 2023 | 52,751 | $320.62 | 3.08 | Note 7 – Fair Value Considerations The company early adopted ASU 2020-06, reclassifying its warrant derivative liability to stockholder's equity, resulting in no financial liabilities classified in the fair value hierarchy as of September 30, 2023 - The company early adopted ASU 2020-06, reclassifying the warrant derivative liability to stockholder's equity effective January 1, 2023[63] - As of September 30, 2023, there were no financial liabilities classified as Level 1, 2, or 3 in the fair value hierarchy[67] Liabilities (December 31, 2022) | Liabilities (December 31, 2022) | Level 1 | Level 2 | Level 3 | Total | | :-------------------------------- | :------ | :------ | :------ | :------ | | Warrant derivative liability | $0 | $0 | $44,000 | $44,000 | Note 8 – Common Stock The company has 300 million authorized shares of common stock, with 804,604 outstanding, and established an ATM Offering Agreement for up to $1,250,000, incurring $136,000 in issuance costs - The company has 300,000,000 authorized shares of common stock[68][69] - As of September 30, 2023, 804,604 shares of common stock were outstanding[69] - An At The Market Offering Agreement was entered into on September 18, 2023, to sell up to $1,250,000 of common stock, but no sales occurred by September 30, 2023, only $136,000 in deferred issuance costs[70][75] Note 9 – Mezzanine Equity and Stockholders' Equity Series D Preferred Stock was issued and redeemed, the 2023 Stock and Incentive Plan was approved, and share-based compensation expense significantly decreased due to workforce changes - 15,103 shares of Series D Preferred Stock were issued on May 24, 2023, and redeemed on July 27, 2023, after the reverse stock split approval, classified as mezzanine equity[77][78][83] - The 2023 Stock and Incentive Plan was approved in July 2023, reserving 1.2 million shares for future equity awards[84] Share-based Compensation Expense | Share-based Compensation Expense | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development | $3,000 | $(23,000) | $(27,000) | $118,000 | | General and administrative | $43,000 | $186,000 | $147,000 | $675,000 | | Total | $46,000 | $163,000 | $120,000 | $793,000 | Note 10 – Earnings Per Share Basic and diluted net loss per common share significantly improved for both the three and nine months ended September 30, 2023, with potentially dilutive shares excluded due to anti-dilutive effects Earnings Per Share | Earnings Per Share | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss available to common stockholders | $(1,229,000) | $(7,578,000) | $(6,578,000) | $(19,501,000) | | Basic weighted-average common shares outstanding | 804,158 | 753,620 | 804,158 | 753,616 | | Diluted weighted-average shares outstanding | 804,158 | 753,620 | 804,158 | 753,616 | | Earnings per share – basic | $(1.53) | $(8.51) | $(8.18) | $(18.73) | | Earnings per share – diluted | $(1.53) | $(10.06) | $(8.18) | $(25.88) | Potentially Dilutive Shares | Potentially Dilutive Shares | September 30, 2023 | September 30, 2022 | | :------------------------------------ | :------------------- | :------------------- | | Warrants to purchase shares of common stock | 52,751 | 53,257 | | Outstanding stock options | 12,719 | 18,206 | | Restricted stock awards | 447 | 670 | | Total potentially dilutive shares | 65,917 | 72,133 | - Potentially dilutive shares were excluded from EPS calculations due to their anti-dilutive effect[95] Note 11 – Subsequent Events Through October 31, 2023, the company generated $0.1 million in gross proceeds from the sale of 27,417 common shares under its ATM Offering Agreement, offset by $94,000 in offering-related costs - Through October 31, 2023, the company received $0.1 million in gross proceeds from the sale of 27,417 common shares via the ATM Offering Agreement, with $94,000 in offering costs[96] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, highlighting reduced net losses and operating expenses, but also ongoing going concern uncertainty Accounting Policies The company's financial statements adhere to GAAP, with no substantial changes in significant accounting policies or estimates from the prior annual report - The company's financial statements are prepared in accordance with GAAP, and significant accounting policies and estimates have not substantially changed from the 2022 Annual Report[98][99] Results of Operations The company significantly reduced its net loss and operating expenses for both the three and nine months ended September 30, 2023, driven by cost-cutting measures Net Loss Comparison The company significantly reduced its net loss, reporting $1.2 million for the three months and $6.6 million for the nine-month period, primarily due to an 82% decrease in operating expenses for the quarter Net Loss Comparison | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(1.2) million | $(6.4) million | $(6.6) million | $(14.1) million | | Operating expenses | $1.4 million | $7.7 million | $7.4 million | $19.6 million | - Operating expenses decreased by $6.3 million (82%) for the three months and $12.3 million (63%) for the nine months, primarily due to reductions in R&D and G&A costs[104][105] Operating Expenses Operating expenses saw substantial reductions in R&D (88% for the quarter) and G&A (64% for the quarter) due to workforce reductions, asset impairments, and discontinued clinical trials Operating Expense Category | Operating Expense Category | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and Development | $329,000 | $2,747,000 | $1,197,000 | $8,177,000 | | General and Administrative | $1,071,000 | $2,975,000 | $6,106,000 | $9,504,000 | - R&D costs decreased by $2.4 million (88%) for the quarter and $7.0 million (85%) for the nine-month period, primarily due to a 78% workforce reduction and shift to pre-clinical contract lab services for OA-201[108][109][110][117][120] - G&A costs decreased by $1.9 million (64%) for the quarter and $3.4 million (36%) for the nine-month period, mainly due to lower legal and defense costs (offset by insurance recovery) and reduced consulting expenses[125][126][132][133] - Clinical trial and sponsored research expenses decreased by 103% for the quarter and 100% for the nine-month period due to the discontinuation/finalization of Ampion clinical trials[116][125] Other Income Other income decreased for the nine months ended September 30, 2023, primarily due to the absence of a derivative gain, despite increased interest income and a non-cash gain from a sublease Other Income Category | Other Income Category | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Interest income | $79,000 | $80,000 | $280,000 | $116,000 | | Rental income | $92,000 | — | $213,000 | — | | Gain from elimination of ARO obligation, net | — | — | $288,000 | — | | Derivative gain | — | $1,167,000 | — | $5,384,000 | | Total other income | $171,000 | $1,247,000 | $781,000 | $5,500,000 | - Interest income increased by $0.2 million for the nine-month period due to higher interest rates[138] - A non-cash gain of $0.3 million was recognized from the elimination of an asset retirement obligation and $0.2 million in rental income, both associated with the March 2023 sublease agreement[138] - No derivative gain was recognized in 2023 due to the adoption of ASU 2020-06, which converted warrant liability to stockholder's equity[138] Cash Flows Net cash used in operating activities significantly decreased to $6.3 million for the nine months ended September 30, 2023, with no cash flows from investing or financing activities in the 2023 period Cash Flow Category | Cash Flow Category | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(6,255,000) | $(16,834,000) | | Net cash provided by investing activities | — | — | | Net cash used in financing activities | — | $(111,000) | | Net change in cash and cash equivalents | $(6,255,000) | $(16,945,000) | - Net cash used in operating activities decreased by $10.6 million for the nine months ended September 30, 2023, compared to the prior year[141] - No cash was used in investing or financing activities during the nine months ended September 30, 2023[142][143] Liquidity and Capital Resources As a pre-revenue company with an accumulated deficit, Ampio expects continued operating losses and relies on capital raising, facing substantial doubt about its going concern ability - The company is a pre-revenue stage biopharmaceutical company that expects continued operating losses and relies on capital raising[144] - As of September 30, 2023, the company had $6.4 million in cash and cash equivalents and expects sufficient liquidity into the first quarter of 2024[145] - Existing factors raise substantial doubt about the company's ability to continue as a going concern, with plans to fund the OA-201 program through equity offerings[146][150] - Risks include significant stockholder dilution, challenges in raising funds due to depressed stock price, and potential delays in OA-201 development or even liquidation if funding is insufficient[149][150] Off Balance Sheet Arrangements The company does not have any off-balance sheet arrangements, financings, or relationships with unconsolidated entities - The company does not have any off-balance sheet arrangements[151] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Ampio Pharmaceuticals, Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Ampio Pharmaceuticals, Inc. is exempt from providing quantitative and qualitative disclosures about market risk[152] Item 4. Controls and Procedures The company's CEO and CFO concluded that its disclosure controls and procedures were effective as of September 30, 2023, with no material changes in internal control over financial reporting Disclosure Controls and Procedures The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2023 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[153][154] Changes in Internal Control over Financial Reporting There were no material changes in the company's internal control over financial reporting during the period covered by the report - There were no material changes in the company's internal controls over financial reporting during the period covered by the report[155] PART II – OTHER INFORMATION This section provides information on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings Ampio Pharmaceuticals, Inc. is involved in several material legal proceedings, including a securities fraud class action, multiple shareholder derivative complaints, and an ongoing SEC private investigation - The company is a defendant in Kain v. Ampio Pharmaceuticals, Inc., et al., a securities fraud class action, where an amended complaint was filed on October 16, 2023, adding the current CFO and former directors as defendants[156][163] - Multiple shareholder derivative complaints (Maresca, Marquis, McCann v. Martino, et al.) have been filed, alleging breach of fiduciary duty, violations of Exchange Act sections, unjust enrichment, and waste of corporate assets, all of which are currently stayed[163][169][173][169][171][174] - The SEC initiated a private investigation on October 12, 2022, issuing subpoenas to the company and its personnel, with the company intending to cooperate fully[174] Item 1A. Risk Factors A new material risk identified is potential disruptions at the FDA and other government agencies, which could delay product development or capital raising efforts - No material changes to risk factors from the 2022 Annual Report, except for a new risk concerning disruptions at the FDA and other government agencies[175] - Disruptions at the FDA or SEC due to funding shortages, global health concerns, or U.S. government shutdowns could delay product development (OA-201 program) or capital raising plans, adversely affecting the business[175][178][179][180] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable to the company for the reporting period - This item is not applicable[181] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[181] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[181] Item 5. Other Information No directors or officers reported adoption, modification, or termination of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers reported adoption, modification, or termination of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended September 30, 2023[181] Item 6. Exhibits This section lists all exhibits filed or furnished with the Quarterly Report on Form 10-Q, including various certificates of incorporation, bylaws, agreements, and certifications - The report includes a comprehensive list of exhibits, such as corporate governance documents, agreements, and certifications[182][183] SIGNATURES This section contains the official signatures of the company's principal executive and financial officers, certifying the accuracy of the report Report Signatures The Quarterly Report on Form 10-Q was duly signed on behalf of Ampio Pharmaceuticals, Inc. by Michael A. Martino, CEO, and Daniel G. Stokely, CFO, on November 14, 2023 - The report was signed by Michael A. Martino, CEO, and Daniel G. Stokely, CFO, on November 14, 2023[184][185]